Salary increases are expected this year on stronger economy

Real salary increases are expected this year supported by positive economic developments, record-high commodity prices, a stronger rand, and low inflation, according to an analysis by PayInc 

The PayInc Net Salary Index, which tracks net salaries of approximately 2.15 million salary earners in South Africa, ended 2025 on a positive note with salaries tracking higher than a year ago, it said in a statement.

“Although the average nominal salary flattened in December 2025 at R21 397, it was still 1.8% higher than a year ago,” said Shergeran Naidoo, the head of Stakeholder Engagements at PayInc. 

The upward trend in net salaries during 2024 continued into 2025, with the average nominal salary rising by 3.7%, compared to 4.6% in the previous year.

“The sustained recovery in salaries reflects the gradual improvement in economic activity and the economy’s resilience, despite multiple challenges,” says Elize Kruger, Independent Economist.

In real terms, the PayInc Net Salary Index declined in December by 0.3% month-on-month to R20 641, becoming the sixth consecutive month of dipping below year-ago levels. This also reflected the gradual uptick in consumer inflation from 2.7% in March to 3.6% in December.

“Still, with average consumer inflation at only 3.2% in 2025, the average real net salary as measured by the PayInc Net Salary Index was still up by 0.5% compared to 2024,” said Kruger.

Kruger is optimistic that 2026 will deliver another year of real salary growth. “From record-high commodity prices and a rand trading below the R16/USD mark for the first time since 2019, to consumer inflation at its lowest average level in 21 years, there is good reason to expect a positive year for salaries,” she says. “In addition, there remains scope for further interest rate cuts.”

Carpe Diem Research forecasts real GDP growth of 1.6% in 2026, up from an estimated 1.3% in 2025.

Consumer inflation is forecast to rise to 3.4% in 2026 from a 21-year low of 3.2% in 2025. Price-setting will likely be driven by moderate global oil prices, a stronger rand and easing inflation expectations.

“A gradual downward trend in wage settlements in the medium term can be expected as companies start to embrace the lower inflation expectations,” said Kruger. “However, multi-year wage agreements, set under the previous inflation target regime, will support the average salary increase in the economy for some time.”  

A recent Andrew Levy Employment Publication poll on stakeholder and company expectations about remuneration in 2026 revealed that most companies anticipated salary increases would remain at the same level as the last settlement. In terms of increases in remuneration for salaried staff, 67% of respondents anticipated these would range between 4% to 5.9%. The findings show it will take some time for wage expectations to adjust to the new lower inflation target adopted for South Africa in 2025.

Meanwhile, other factors are determining wage adjustments. One of the most significant findings from the latest Remchannel Quarterly report is the growing influence of skills retention on remuneration strategies. Skills retention now accounts for 25.8% of the criteria used by local companies when determining annual salary increases, showing a decisive shift toward skills-based pay structures.

“With a second consecutive year of real income growth, 2025 was a positive year for earners and supported higher consumption, as reflected in stronger retail sales. Given the positive developments in the economy, a repeat performance is likely in 2026,” said Kruger.

ere to edit this text.